Microsoft is reportedly getting ready to take on Apple and Google on their tablet turf with a 7-inch slate of its own.

The smaller tablet is expected to go into production later this year, people familiar with the matter told The Wall Street Journal. The 7-inch tablet wasn't part of Microsoft's original strategy last spring, but executives realized they needed a slate to compete with Google's 7-inch Nexus and Apple's 7.9-inch iPad Mini, the Journal's sources said.

CNET has contacted Microsoft for comment and will update this report when we learn more.

The Journal did not reveal an expected price, but it will presumably be lower than current Surface prices to compete with Apple and Google's tablets, making it more attractive to budget-conscious consumers.

The smaller version has been the subject of much speculation after Microsoft announced last month that it was relaxing the minimum resolution for Windows 8 devices, suggesting a 7-inch Windows 8 tablet could be around the corner. To claim Windows 8 certification, a tablet now must offer a minimum resolution of 1,024x768, down from the previous minimum resolution of 1,366x768.

Consumers' appetite for smaller tablets is voracious. Half of the tablets shipped in the fourth quarter of 2012 were less than 8 inches in screen size, according to IDC's Worldwide Quarterly Tablet Tracker. Market researcher Display Search recently revised an earlier forecast, suggesting that smaller tablets will outsell their larger counterparts in 2013:

Apple had planned to sell 40M iPad minis (7.9") and 60M iPads (9.7") in 2013. However, the reality seems to be the reverse, as the iPad mini has been more popular than the iPad. We now understand that Apple may be planning to sell 55M iPad minis (7.9") and 33M iPads (9.7") in 2013. At the same time, Samsung, Amazon, Google, ASUS and Acer are all eyeing the 7-9" segment to grab tablet PC market share, while many white box makers in China are also emphasizing the smaller size tablet PC.